WATER: County Water Authority to explore doing desalination deal

Poseidon deal could go around local agencies

The San Diego County Water Authority's board agreed Thursday to
consider striking its own deal to buy desalinated water from
Poseidon Resources Corp.

The vote authorized Water Authority staffers to talk with
Poseidon, which plans to build a desalination plant in coastal
Carlsbad.

Poseidon already has an agreement with nine local water
agencies, but it has stalled on financing problems.

The authorization is for exploratory talks, said Maureen
Stapleton, the authority’s general manager.

Official negotiations would need to be approved at another
authority meeting, scheduled for July 22.

The agencies are the cities of Carlsbad and Oceanside, along
with Sweetwater Authority, Santa Fe Irrigation District, and Valley
Center Municipal, Rincon del Diablo Municipal, Rainbow Municipal,
Olivenhain Municipal and Vallecitos water districts.

All nine, along with Poseidon, sent letters to the Water
Authority, the county's main supplier, encouraging it to try its
hand at crafting a deal.

Poseidon has the needed approvals to build the plant next to the
Encina Power Station, but lacks the money to do so.

Under the possible deal, the authority would contract to buy
water from the Poseidon plant, which would have a capacity of
making 50 million gallons a day, about 9 percent of the county's
needs.

The authority would then resell the water to its member
agencies.

The board's approval followed a recommendation earlier Thursday
afternoon from the authority's water supply committee to pursue the
purchase agreement.

While most members of that committee spoke favorably of the
deal, James Bond, an Encinitas city councilman who represents the
San Dieguito Water District on the board, said he was
"uncomfortable," because the deal appeared to be shaping up much
like the original one.

"The contract itself looks very similar to the one the nine
agencies had, and that worked really well, up until the point where
there wasn't any money and they couldn't pay for it," Bond
said.

Stapleton said the authority won't assume risk, and will pay
only for water that meets its standards.

"Director Bond, I can't assure you that we'll be back July 22
with a project that works," Stapleton said. "I may be back here to
say we gave it our best effort, but we can't get there. ... What
I'm telling the board is, I believe this option is viable, and
please let the staff go off to see if it actually is true."

Desalinated water is considerably more expensive than water from
other sources, but the cost would be averaged into the total cost
of water for the 24 local agencies that make up the Water
Authority.

So their additional cost would be proportionately less than if
the entire cost were borne by the nine agencies.

Originally, those agencies were to have the cost defrayed with a
subsidy from Metropolitan Water District, Southern California's
giant wholesaler, which sells to the Water Authority.

The subsidy, of up to $250 an acre-foot, would make the price
competitive with other sources.

An acre-foot is about 325,000 gallons, enough for two average
families of four people for one year.

However, Metropolitan's contracts with the Water Authority allow
it to cancel any subsidies if it's sued.

Earlier this month, the Water Authority sued Metropolitan over
what it said is an unfair rate structure that causes the authority
to pay too much for Metropolitan's water.

With the subsidy in jeopardy, Poseidon hasn't been able to raise
the $530 million it needs to build the plant.